Gillard's flood levy sets off wave of criticism

By Phillip Coorey CHIEF POLITICAL CORRESPONDENT

THE federal government is facing a flood repair bill of more than $5 billion before taking into account the revenue losses caused by the broader impact of the floods on the economy.

The Prime Minister, Julia Gillard, will detail the damage bill today as she unveils the package of measures to pay for it.

The package is expected to include a one-off levy on taxpayers as well as a series of budget spending cuts and deferrals. It is believed the levy will be two-tiered, with higher rates applying to higher income earners.

The budget cuts and the levy - tipped to be an increase in the Medicare levy for 12 months - were completed by Ms Gillard and her senior ministers on Tuesday. They will be put before a special meeting of the cabinet this morning. Ms Gillard will then unveil the package in a speech to the National Press Club.

The figure of $5 billion-plus is an initial estimate by Treasury of the Commonwealth's contribution towards rebuilding bridges, roads, railway lines and other infrastructure destroyed in Queensland and Victoria.

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On Friday the Treasurer, Wayne Swan, will give an estimate of the broader revenue losses to the economy caused predominantly by damage to the mining and agricultural sectors. ''There will be significant cuts and hard decisions have been necessary to find the resources that will be needed to rebuild Queensland,'' a government spokesman said.

In recent days Mr Swan has paved the way for the levy, describing it as the answer to Australia's biggest natural disaster in terms of economic impact.

The government remained tight-lipped on details of the levy yesterday, refusing to even confirm or deny there would be one. The Coalition stepped up its assault with the Opposition Leader, Tony Abbott, branding it a ''mateship tax'' because it contravened the spirit which endured throughout the floods.

''Mates help each other, they don't tax each other,'' he said.

The shadow treasurer, Joe Hockey, said with rising food and electricity prices, and high interest rates, a new levy was ''just too much on the top''.

The government opted for a levy rather than cutting the budget and delaying the forecast return to surplus in 2012-13, by when the next election was due.

One source said the budget cuts as agreed on Tuesday would cause more anger than the levy.

Big business has given the government the green light to stay in deficit a bit longer but the government believes it must honour its surplus promise.

A levy would be most likely to start on July 1 and last a year, expiring before the mining tax and potentially a carbon tax begin on July 1, 2012.

The levy would need the approval of the existing Senate, meaning the Greens, Nick Xenophon and Steve Fielding would have to support it.

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The Greens have called for low-income earners to be exempt and want the mining tax to be ramped up to offer relief revenue.

Senator Xenophon has offered in-principle support for a levy but stipulated it be ''reasonable'' and properly targeted. Senator Fielding told the Herald he was open to the idea but needed to see details.